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MARKET SNAPSHOT: U.S. Stock Indexes Retreat On 'cliff' Worries
Dow Jones News
By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks finished mostly lower on Monday, with the S&P 500 Index ending a five-session winning streak, as lawmakers readied to debate the so-called fiscal cliff.
"It's like coming back to earth in terms of reality sinking back in. We started this with a lot of good feelings and nice words, but coming to a real deal is a lot harder," said Bill Stone, chief investment strategist at PNC Asset Management Group, of White House and congressional efforts to reach a budget deal.
"We wouldn't be surprised if we don't get a deal until next year, though no doubt they are going to try. But they are further away than the early good rhetoric would have made you feel," Stone added.
Stock indexes came off session lows, with the Nasdaq Composite Index (RIXF) turning positive, after Bloomberg News reported the European Central Bank was receptive to the idea of giving up its profits on Greek debt.
The reported move is "a likely step closer to getting a deal amongst the troika on Greece," wrote Peter Boockvar, an equity strategist at Miller Tabak, in emailed comments.
After a 109-point drop, the Dow Jones Industrial Average (DJI) fell 42.31 points, or 0.3%, to end at 12,967.37, with 23 of its 30 components in retreat.
UnitedHealth Group Inc. (UNH) fell 0.7% after the insurer and Dow component projected 2013 profit lower than Wall Street estimates.
The S&P 500 (SPX) declined 2.86 points, or 0.2%, at 1,406.29, with telecom and energy declining the most among its 10 major industry groups and utilities and technology faring best.
Bucking the negative trend, the Nasdaq gained 9.93 points, or 0.3%, to 2,976.78, with shares of social-networking firm Facebook Inc. (FB) rallying 8.1%. Shares of iPhone and iPad maker Apple Inc. (AAPL) rose 3.2%.
On the New York Stock Exchange, 633 million shares traded Monday. Composite volume exceeded 2.9 billion.
Oil prices declined along with equities, with crude futures for January delivery down 54 cents at $87.74 a barrel.
Treasury prices gained with the yield on the benchmark 10-year note , used in figuring the rates on mortgages and other consumer loans, falling to 1.66%.
Congress is back in session this week after the Thanksgiving break, with lawmakers looking to reach an agreement to avert more than $600 billion in automatic tax hikes and across-the-board spending cuts that would kick in next year.
David Kelly, chief global strategist at J.P. Morgan Funds, believes a deal will be reached before Christmas, but until then, markets will be in the dark on the impact on tax rates and the economy. Such uncertainty, he said, is "restraining gains in economic activity, stock prices and interest rates."
"Once the fiscal fog clears, all three could move higher, suggesting that this probably remains a time to be a little overweight risk assets," Kelly wrote in a research note.
In an unexpected development Monday, Bank of Canada Gov. Mark Carney was appointed to be the next head of the Bank of England. Carney, the current head of the Group of 20's Financial Stability Board, succeeds Mervyn King at the helm of the central bank.
In Brussels, euro-zone finance ministers met again in an effort to settle on the release of another rescue payment to Greece, after failing to do so in two other attempts this month.
The simplest and cheapest solution to Greece's debt fiasco is for other European governments to give it enough money to get its economy growing again in the short term, in exchange for long-term fiscal reforms, according to Kelly.
"The cost of not lending Greece money appears too high for the Europeans to refuse to do so. However, loans in return for additional austerity in an already disastrous economy is simply the wrong policy," he wrote.
Yardeni sees year-end rally
U.S. consumers were active during the long weekend, giving retailers a robust beginning to the holiday-shopping season, according to data released Sunday afternoon.
On Friday, Wall Street gained for a fifth session, with the S&P 500 advancing 3.6% on the week, as some analysts suggested the holiday-shortened week's rise was setting the stage for a year-end rally.
"As we all know, stock prices have a tendency to do well this time of year. Sometimes rising stock prices during the week of Thanksgiving set the stage for a year-end rally. I'm still expecting one this year," wrote Ed Yardeni, chief investment strategist at Yardeni Research Inc., in a note.
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